Timely cash flow throughout the construction payment chain is fundamental to a healthy construction industry. Delay in payment anywhere in the supply chain chokes economic growth in that it reduces profit, restricts innovation and investment in plant, machinery and people. It also increases the cost to finance company operations and drives up the cost of construction overall.
The impact of payment delays on small and medium-sized enterprises can be disproportionately severe, and even a minor delay in payment of one or two invoices can put smaller businesses under severe financial stress.
Nationwide, $46 billion in construction invoices remained unpaid beyond a 30-day period, an amount representing approximately 16 per cent of the estimated $285 billion in annual construction activity in Canada. Worse yet, between 2007 and 2012, the average duration of receivables increased by more than 13 per cent, rising from 62.8 days to 71.1 days.
In December 2017, the Province of Ontario became the first Canadian province to pass legislation to address payment delays after reforming its Construction Lien Act. The legislation flowed from recommendations contained in the Construction Lien Act Review Report written for the Province of Ontario by Bruce Reynolds and Sharon Vogel.
In early 2018, the Government of Canada announced its intention to consult, draft, and pass legislation that would guarantee prompt payment and an adjudication system for federal government-owned projects.
VRCA is supporting the Canadian Construction Association’s efforts to see prompt payment legislation enacted by the Government of Canada. Federal legislation would apply to federally funded projects.
VRCA is also supporting the British Columbia Construction Association’s effort to see prompt payment legislation introduced by the Province of British Columbia. Provincial prompt payment legislation would apply to publicly and privately funded projects in British Columbia.